A program steering a quarter of state and municipal projects to small and minority contractors is inching closer to a major overhaul, with proposed changes that would redefine the size of a small business and create a larger pool of applicants vying for publicly financed projects.

House Bill 5278 would raise the gross revenue cap to qualify as a certified small or minority contractor from $15 million to $30 million under the Department of Administrative Services' Supplier Diversity Program, commonly known as the "set-aside program."

The higher revenue cap would only apply to businesses in 25 "distressed communities," including Hartford, New London, New Britain, Waterbury, Bridgeport and New Haven, among others.

The state set-aside program requires state agencies and local governments to reserve 25 percent of contracts — for public works projects and goods and services purchases — for exclusive bidding by certified small contractors. Of that amount, 6.25 percent of contracts are set aside for small companies owned by women, minorities or people with disabilities.

Proponents pushing for the higher revenue cap say the program is too restrictive and that it makes it difficult to find qualified contractors in certain municipalities. Others, including the state Department of Administrative Services, which oversees state contracts, argue the $15 million cap is adequate and provides a level playing field for small companies.

According to DAS, state agencies and local governments in 2017 reported spending more than $366 million on small and minority-owned businesses assigned to state projects.

The Connecticut Commission of Human Rights and Opportunities, or CHRO, is responsible for administration of municipal public works contracts.

The bill, which has been raised in previous legislative sessions, is coming under the spotlight now as cities and towns look for ways to trim costs amid the state's budget crunch.

Officials said the set-aside program does increase the costs of municipal projects by limiting potential contract bidders.

The legislation recently passed out of the Commerce Committee in a 19-1 vote, but still needs approval from the House and Senate, in addition to the governor's signature before it becomes law in 2019.

Supporters

Robert Halligan, the chief financial officer of Beacon Light & Supply Co. in Hartford, wrote in testimony to the Commerce Committee that he wants the revenue cap increased because the current $15 million threshold is "tiny" in the electrical supplier industry.

The current cap limits Beacon's ability to grow, Halligan wrote, which means the minority certified distributor of electrical supplies and equipment can't buy new equipment or hire new employees.

A minority shareholder of the company, he warned that if Beacon's growth is restricted in Connecticut, they would relocate to New York, which has no revenue limit for minority companies seeking work on publicly financed projects.

The Connecticut Conference of Municipalities also endorsed the bill, stating that it is too difficult for some towns and cities to receive bids from minority-owned or small-business contractors and that increasing the revenue cap would create a larger pool of eligible companies.

CCM said targeting distressed communities will further the bill's mission of creating economic opportunity for all.

Furthermore, the organization says the set-aside program's revenue threshold is long overdue for an increase and that the proposal "reflects inflationary growth."

Opposing view

But a lobbyist for the Mechanical Contractors Association challenged that assertion, citing the program's increased threshold in 2007 from $10 million to $15 million. The cost of living since then has not warranted increasing the cap to $30 million, the group said.

Meanwhile, DAS Commissioner Melody Currey said her agency opposes the bill because it undermines the ability of small businesses to compete with each other fairly.

Currey said the set-aside program increases project costs for municipalities, but serves as a fair and equitable way to ensure that small businesses are brought into the marketplace.

"It didn't seem fair and equitable to do it that way," she said. "$30 million is a high bar for a small business."

Incremental changes

Established in 1977, the set-aside program was administered by the state Department of Economic and Community Development until DAS took it over in 1999.

DAS officials said the program has not been significantly changed in recent years, although the gross revenue cap increased to $15 million in 2007.

According to DAS, state agencies in 2017 reported spending $234.1 million on small businesses and $130.1 million on minority-owned companies.

Meanwhile, local governments reported spending almost $768,000 on small businesses and more than $1 million on minority contractors for projects that received state aid.

According to the state's website, there are more than 2,500 small businesses certified as small or minority contractors and hundreds of them are currently working on state contracts ranging from landscaping, temp staffing and snow removal, to construction services, graphic design and advertising.